This proposal is designed to specifically respond to the RFA in Regenerative Dental Medicine by improving our understanding of the role of the local microenvironment on human embryonic stem (ES) cell differentiation. We will compliment in vitro approaches with another key concept outlined in the RFA, that is, the study of hES cell differentiation on designed biomaterial scaffolds in vivo. The long term goal of our research is to begin to understand the signals that specify osteoblast differentiation of hES cells. Based on the research interests of our team and the major gaps in knowledge of stem cell biology, we will evaluate the central hypothesis that the lineage progression of human ESCs to osteoblasts can be controlled by signaling from the local microenvironment. We will first determine the influence of the feeder layer and/or pro-osteogenie growth factors in directing lineage progression of hES cells to osteoblast-like cells in vitro. In the second aim, we plan to use lineage specific transgenes driving supravital marker genes to isolate, manipulate and follow the fate of cells so that they can be isolated and studied as a homogeneous population. Once specific tissue culture conditions are identified that promote bone cell differentiation from the hES cells, we will use a more physiologically relevant model system to study osteoblast differentiation of human ES cells in vivo by controlling the microenvironment on designed biomaterials. In our third aim we will determine how local microenvironmental cues regulate the fate of ES cells in vivo by transplanting both undifferentiated hES cells and osteoblast lineage-selected cells to defined in vivo locations. These studies will further our understanding of the biology of lineage segregation during normal development and provide essential information for the development of future tissue regeneration strategies.